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D&O Definitions Flashcards

1
Q

Astar

A

WTW’s Side A DIC Wording

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2
Q

Darcstar

A

WTW ABC D&O wording

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3
Q

Hard Market

A

When it is harder to place insurance and premiums are higher / terms are worse

Less competition for insurance policies

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4
Q

Soft Market

A

Competitive Insurance market

Insurers want to expand market share and offer better terms.

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5
Q

In the aggregate

A

Limit used for all total claims

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6
Q

AOC

A

limit for ‘Any one claim’ (Usually soft market)

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7
Q

Non Executive director

A

Member of company’s board of directors who is not a company employee.

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8
Q

Side A

A

Cover for the personal assets of the individual directors & officers

When company will not indemnify

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9
Q

Side B

A

Cover for the company when they indemnify the directors & officers

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10
Q

Side C

A

Cover for business against securities claims

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11
Q

Additional Limit

A

Adds on top of the limit of liability

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12
Q

Sub-limit

A

Section of the limit of liability used for specific events/conditions

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13
Q

Side A DIC

A

Side A difference in condition, separate insurance cover for the individual directors & officers

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14
Q

Excess layer

A

Sits ontop of the primary insurance policy

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15
Q

Drop down coverage

A

Cover that drops down when lower cover will not pay out

Ensures no ‘Gap in cover’

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16
Q

Derivative suit/claim

A

Legal action brought by shareholders on behalf of a company against corporate misuse.

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17
Q

Fee vs Commission

A

Commission - Percent agreed with insurer but paid out of insureds premium (Come from insurer though)

Fee - Fee paid by the insured / client for broking services.

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18
Q

SPAC

A

Special Purpose Acquisition Companies

  • Company that is created to raise capital through IPO to then Merger or Acquire another company
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19
Q

Public company

A

PLC - Shares traded on stock exchanges

2+ directors
Unlimited shareholders

Financial info available publicly

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20
Q

Private company

A

Ltd - Shares not traded publicly

1 director needed
50 Max shareholders

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21
Q

Explain what the A Star facility is

A

Direct line agreement with specific insurers to provide a fixed service for Side A DIC cover.

10% taken from premium for fees

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22
Q

What are the two types of A star facilities

A

Lloyds (Beazley & The Hart)
Company (Allianz & AIG)

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23
Q

Limits for each facility

A

Lloyds = 50m (Better for higher limit levels)
- 12.5m for AFB & HART, 25m for other markets

Company = 30m (Allianz & AIG)

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24
Q

Who else writes A star

A

Chubb Bermuda (Sometimes beneficial to have solo insurer for claims reasons)

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25
What is different about the reporting periods in A*?
1.90 day extended reporting period 2. Unlimited reporting period for retired insured persons 3. Free 8 year insolvency discovery period 4. Optional extended reporting periods
26
What are the benefits of A star DIC facility
Auto reinstatement x2 Only one narrow exclusion (unlike other DIC policies) = Preferential terms for clients
27
What should be avoided for A star DIC
Avoid having same markets on Primary ABC and A star Because it doubles chances of gap in coverage
28
What is an ILF
Increased Limit Factor = What percent of the layer below premium is charged.
29
How does Hard/Soft market impact an ILF
Hard market = High ILF Soft market = Low ILF
30
What is SMB
Subscription Market Brokerage = Essentially is an admin fee we charge underwriters for the admin we do for a placement Some clients do not like this
31
What is a POSI
Public Offering of Share Insurance = Covers claims for public offering *If US listed - No POSI, do endorsement instead
32
Why aren't POSI's used in US listed IPOs
SEC Securities Act 1933 - IPO cover SEC Securities Act 1934 - Post IPO cover Allocation issue: - Insurers are unsure whether claim is covered under IPO or post IPO - Therefore, it is easier to do endorsement - Avoids claims issues
33
Explain the process for an IPO (Non-US)
Company decides to go public IPO prospectus for insurers Current private policy will go into run off POSI cover to cover IPO Go forward cover which will include side C cover.
34
Explain the process for an IPO (US Listing)
Company decides to go public IPO prospectus for insurers Either an extension of current policy + endorsement for IPO. (Need side C cover after) or Re-market and get ABC cover which can cover IPO & go forward. or Re-market + endorsement for IPO.
35
What are the rules around a retrospective SPOE
1. Only out of hours 2. Cannot request retrospective SPOE on EOC
36
What are the benefits of a POSI
IPO claims may exhaust a standard policy This ringfences the claims for the IPO
37
RPM
Rate per Million = What is the rate of the premium per million covered Premium / Millions on limit (e.g 32,000 / 10m = 3.2k RPM)
38
Admitted Coverage
Insurance coverage from insurer who ARE licensed in territory policy is purchased.
39
Non-admitted coverage
Insurance coverage from insurer NOT licensed in the state the policy is issued (Covered via wholesale broker)
40
How is admitted coverage determined
Depends on the regulations from Department of Insurance in the given territory.
41
ADR
American Depositary Receipt = Cert from US bank representing shares in foreign stock.
42
What is a Discovery Period in D&O
Period after the policy expires to report claims to the insurer Wrongful act must have been committed during the policy period Standard = 90 days Extra (e.g 90+) = Additional premium
43
What are the standard DARCStar Discovery Periods
12 months = 125% Premium 36 months = 175% 84 months = 225%
44
What are the common endorsements/notices that attach to a policy at inception
LMA 3100/A Sanctions Limitation and Exclusion Clause LMA 5333 Shared Limits Endorsement Data Protection Notice
45
What is the premium payment clause
Client / Insured must pay premium within 60 or 90 days
46
What US acts cover IPO / public offering for US listings
Securities Act of 1933 - Newly listed securities (IPO) Securities Act of 1934 - Cover post issue of securities (post-IPO)
47
What is the difference between LMA3100 and LMA3100a
LMA3100 - Sanctions Exclusion Clause LMA3100a - Sanctions Limitation Clause
48
What do LMA3100 and LMA3100a do?
They stop insurers providing cover which would expose them to sanctions breach
49
When is the Data Protection Notice used
When a 'Lloyds Market' is on the layer
50
What is a 'run off' policy?
When a company has been acquired it will require a policy to cover any claims made against the entity prior to the merger / acquisition It provides protection for claims that arise from wrongful acts prior to the acquisition Length = Statute of limitations
51
What is a subsidiary
Company owned by or controlled by another company
52
What counts as 'control' to make a company a parent or subsidiary
1. Control composition of board of directors 2. Control more than half of the shareholder or voting power 3. Control holding of more than half of the issued shares or equity of a company (Need 1 of 3 to show subsidiary relation)
53
What is the issue around Joint Ventures and run off policies? Solution?
JV involves directors from 2 companies coming together Insurer for both JV entities will not want to cover the directors from the other. Solution = Get coverage for the JV as own entity
54
What to do when client ACQUIRES another
First - check wording (Specifically 'Transaction / 'change in risk' condition) to see what is covered. Questions of new entity: - US exposure? - Does this now amount to 25% of consolidated assets? Check with UWR - Extra cost? Can this be negotiated
55
What to do when your client gets ACQUIRED?
Seek run off terms Look at the 'transaction' clause in the coverage Important info - Statute of limitations determines length of run off - Cost
56
What are the 4 points to consider when your company gets acquired and goes into run off?
Length of run off (Statute of limitation) Cost Endorsements Brokerage
57
Canadian Endorsements
Used when we have Lloyds market 'Canadian Endorsement' premium = Total percentage from all the states in TMFs
58
Carve back
Partial inclusion to an exclusion Allows some limit for specific matter despite the exclusion
59
Common times a Carve Back is used?
Bodily Injury / Property Damage Defence costs - for Pollution, B&C, War
60
Explain what local policies are
Local Policy is done by a local insurer/broker, who will be admitted to issue the policy: - Complex territory -Where insurer is not admitted Premium paid to this local broker and some limit is set aside/quoted for this
61
What to think of when placing an African exposed policy
Local Policies Anti-bribery/Corruption exclusions
62
Common Retentions
Side C (Securities) Side B (Reimbursement) Employment Practices Corruption & Bribery
63
How to add Local Policies to MRC
Premium - Add in as sub category below total (In slip intro, Schedule and signing page)
64
What does 'Grossing up' mean for brokerage
Working out the brokerage and adding it onto the premium to quote to the client. Then taking the difference. Bad - This should be premium neutral, SMB works down from
65
How should SMB be calculated?
100% - SMB% = Then times by premium Answer is premium for Insurer Difference is SMB
66
Example of SMB (Correct)
100k premium 3.5% SMB 96.5% x 100k = 96.5k Prem to insurer = 96.5k SMB to broker = 3.5k Client to pay 100k
67
Example of SMB (grossed up)
NOTE - this is incorrect 500k Prem 3.5% SMB (17.5) Client pay 517.5k
68
DIC clause in DARCstar
Means the policy will match cover from a prior policy To avoid gaps in cover
69
When is the DIC clause in DARCstar normally used / important?
When switching wording
70
Steps to deal with non-common endorsements
1. Push for removal if detrimental (Can client info help this) 2. Ask insurer for endorsement language 3. Engage with contract team Important - Never accept a underwriter's version
71
D&O Common Exclusions
Conduct Prior Claims Bodily Injury & Property Damage - Carveback for mental anguish USA claims by company/outside entity
72
What does RDI mean?
Retroactive Date Inclusion / Exclusion - Allows or does not allow cover from retroactive date. Want - unlimited or N/A Retro Date = Date from which coverage is provided for wrongful acts.
73
When will the Retro active date be ''From inception"
New company, acquisition or layer.
74
What is the retroactive date in D&O insurance?
Date from which coverage is provided for wrongful acts.

D&O (6 decks)

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